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Genzyme suffered a large loss in the first quarter of 2010 versus the same time period last year, due in large part to a $175 million charge the company will pay the government to settle enforcement actions over its troubled Allston manufacturing plant.
The Cambridge-based biotechnology company known for its medicines to treat rare diseases, recorded a net loss of $114.9 million for the first quarter, compared with net income of $195.5 million, in the first quarter of 2009. Results reflect the impact of the anticipated $175 million expense associated with the so-called consent decree for the company’s Allston manufacturing facility.
The U.S. Food and Drug Administration has slapped the company with a consent degree, a serious enforcement action, following a litany of manufacturing problems that resulted in a shortage of two of the company’s successful products, Fabrazyme and Cerezyme.
Genzyme reported that first-quarter revenue was $1.07 billion, down from $1.15 billion for the corresponding period last year, due to the shortages of the two drugs, following a six-week closure of the Allston plant beginning last June. The company has not yet resumed full shipments of either drug.
The consent decree also requires Genzyme to move its fill/finish operations – the last stages of production where vials of drugs are filled and labeled – to another location. If Genzyme fails to do so by deadlines yet to be determined by the FDA, the company would pay fines equal to 18.5 percent of revenues from sales of products manufactured in Allston after the deadlines. The FDA will approve a remediation plan for the plant, and if the company does not meet compliance deadlines, Genzyme would pay fines of $15,000 per day, per violation. Genzyme said negotiations with the FDA over the terms of the consent decree will be finalized in the second quarter. At that point, the company will provide updated guidance.
Genzyme announced the enforcement action by the FDA on March 24, but at that time, it did not know what the financial impact would be. Genzyme officials said in a release that they expect to pay $175 million in upfront “disgorgements” – fines based on sales of the products produced by the affected facility.
Genzyme also provided updated information about shipments of the two affected drugs. The company continues to ship 50 percent of the total demand for Cerezyme and plans to continue at this pace for the next two to three months. The company disclosed that production suffered a new setback late last quarter, when a “city electrical power failure compounded issues with the plant’s water system,” according to a statement. Officials do not know whether product that was unfinished at that time will still be usable.
Fabrazyme will continue to be shipped at just 30 percent of demand throughout the third quarter. Unfinished Fabrazyme was also affected by the power failure at the plant.
Genzyme also said that the consent decree may negatively impact the timeline for shipments of the two drugs.
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